Cost Accounting: Parson Food Case

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Please use this template for answering your case questions. Your font should be 12 point times new roman and double spaced. Please save your file as GroupXX.docx. When you submit your paper, delete this message. Do not put anything before your reply to the first question. Simply start your answer below the question. Add space as necessary. Delete any words that are in red from your paper before submitting.

1. What markup is EFSA currently charging? Is EFSA in compliance with the maquiladora Safe Harbor provisions for transfer pricing?

Please provide a single numerical answer here. Show calculations for markup in the spreadsheet tab labelled (Q1) markup. Be certain to use formulas in your spreadsheet. You are expected to provide a written response to the second part of this question here.

2. What conditions might exist that encourage EFSA management not to charge the minimum allowable transfer price under the Safe Harbor provisions?

3. Calculate the minimum allowable maquiladora transfer price per pound under the Safe Harbor provisions. Using this new transfer price, calculate PFC’s revised (a) total broccoli costs from EFSA (including import duties) and (b) combined weighted average broccoli cost.

Please provide a single numerical answers for (a) total broccoli costs from EFSA (including import duties) and (b) combined weighted average broccoli costs. Complete your calculations for transfer price in the spreadsheet tab labelled (Q3) transfer price. Be certain to use formulas in your spreadsheet.

4. If EFSA charges the minimum allowable maquiladora transfer price, calculate the effect on EFSA’s pre-tax income and PFC’s pre-tax income.

Please provide a single numerical answers for (a) EFSA pre-tax income and (b) PFC’s pre-tax income. Show calculations for pre-tax income in the spreadsheet tab labelled (Q4) pre-tax income. Be certain to use formulas in your spreadsheet. No written response is expected here for this question.

5. What challenges do you envision when communicating the revised transfer price to EFSA management?

6. Suppose that PFC instructs EFSA to charge the minimum allowable transfer price. (a) What will be the overall after-tax income (and after import duties) effect for EFSA and PFC? (b) Will overall PFC profitability be higher or lower? (c) After performing this analysis, do you think that PFC should instruct EFSA to charge the minimum allowable transfer price? Explain.

Please provide a single numerical answers for (a) the overall after-tax income (and after import duties) effect on EFSA and PFC. Show calculations for this question in the spreadsheet tab labelled income effects. Be certain to use formulas in your spreadsheet. Complete your written responses to this question below.